September 2016 employment summary

September was relatively average, but fundamentals are steady

September saw 156,000 net new jobs created. While relatively average and not up to the consistent 200,000+ seen throughout much of 2014 and 2015, momentum nevertheless remains.

Monthly additions were brought down due to contraction in government and slowdowns in very large sectors such as education and health and retail trade. We expect that these are blips and will be revised or self-correcting in upcoming months. On the other hand, PBS rebounded to healthier levels after a prolonged slowdown with some volatility in recent months.

Job openings growing faster than employment as a result of talent shortages

Unemployment rose by 10bp to 5.0 percent in September on the back of rising labor force participation, which also saw a bump to 62.9 percent. At the same time, initial unemployment claims continue to fall, with the moving average resting near a cyclical low of 250,000 per week.

In turn, job openings are rising due to broad-based economic growth but a smaller amount of slack in the labor market to absorb the need for growing headcounts. Job openings have jumped by 3.9 percent over the year even as employment is only up 1.7 percent. For PBS, 5.9-percent growth in job openings is signaling strong demand by employers, but employment rose by just 2.9 percent as labor force growth cannot keep up.

Consumer confidence rising on the back of meaningful wage growth

Wage growth rose once again to 2.6 percent in September. While typical, the continued low-inflation environment has helped to keep the cost of goods and to a lesser extent services down, even as inflation has reached the 1-percent mark.

More meaningful growth in disposable income is powering personal consumption expenditures, which has kept GDP rising in the face of stagnant business investment as well as bringing consumer confidence to a cyclical high of 104.1 points.